Topic: Home Equity Line of Credit (HELOC)
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Does the Illinois High Risk Home Loan Act cover HELOCs? And, if multiple interest rates could apply throughout the life of a HELOC, which rate should be used for purposes of determining whether a loan exceeds the APR thresholds in the Act?
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The Illinois High Risk Home Loan Act (the “Act”) presently excludes all “open-end credit plans” as defined by Regulation Z in the year 2000. 815 ILCS 137/10. That definition covers “consumer credit extended by a creditor under a plan in which: (i) The creditor reasonably contemplates repeated transactions; (ii) The creditor may impose a finance…
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Is it true that Illinois law prohibits mortgages on revolving lines of credit of $5,000 or less?
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We understand that your sfotware vendor is taking a conservative position as to possibly conflicting provisions in Illinois law. The Interest Act does not allow a lender to take a security interest in real property unless the loan is in excess of $5,000. 815 ILCS 205/4.1. However, the Illinois Financial Services Development Act allows financial institutions…
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Are there any compliance issues in using a HELOC to secure a home purchase mortgage loan?
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While there is some indication that HELOC proceeds may be used to purchase a home, we have never encountered such a situation. The federal commentary on the right to rescission acknowledges that residential mortgage transactions are made on open-end credit plans, while noting that this practice is seldom used. Comment 1, Official Staff Commentary, 12…
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Does the right of rescission (ROR) apply to a home equity line of credit secured by an Illinois land trust?
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In our view, such a customer would have a right of rescission if his or her interest in the land trust is subject to the security interest. Regulation Z provides a right to rescind to “each consumer whose ownership interest is or will be subject to the security interest . . . .” 12 CFR 1026.15(a). This right to…
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If a wife takes out a HELOC on the couple’s primary residence, does the husband get a notice of right of rescission and sign the homestead waiver, even if he does not own the property?
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The husband does not receive a notice of the right of rescission, but the husband should sign the homestead waiver. The right of rescission only applies to persons with an ownership interest in the property. Having homestead rights only does not give rise to rescission rights. However, a spouse must sign the homestead waiver or…